Japanese stocks retreated from three-month highs on Friday as escalating US-China tensions over Hong Kong prompted investors to lock in profits, but easing coronavirus restrictions helped Nikkei mark its best month in more than four-and-a-half years.
The benchmark Nikkei average fell 0.18% to 21,877.89, but the index gained 8.3% for May, its biggest monthly gain since October 2015, thanks to optimism around economies worldwide reopening from lockdowns.
The broader Topix dropped 0.9% to 1,563.67, also off its three-month high touched on Thursday, with all but five of the 33 sector sub-indexes on the Tokyo exchange finishing lower.
Turnover shot up to 4.64 trillion yen, the third highest this year, though the amount was boosted by rebalancing flows related to re-shuffling in MSCI indexes.
China's passage of a national security law for Hong Kong dampened risk sentiment, with US President Donald Trump scheduled to hold a news conference on China on Friday as his administration moves to pressure Beijing over its treatment of Hong Kong.
Highly cyclical steelmakers, shippers and automakers were among the three worst-performing sectors on the main bourse, reversing their sharp gains from earlier this week.
Nissan Motor Co Ltd slumped 10.8% after it posted an annual operating loss of 40.5 billion yen ($377 million) for the business year ended in March, its worst performance since 2008/09.
Nikon Corp slumped 9.1% after reporting a massive 91.8% fall in its operating profit for the financial year ended March 31.
Bucking the overall trend, the index of Mothers start-up shares advanced 3.6% to a high last seen in December 2018.
($1 = 107.42 yen)
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